The Financial Services Agency has decided not to use additional public funds to help cover losses on loans left by seven housing loans firms that went bust in the late 1990s, sources close to the move said Sunday.
Instead, the FSA will tap surplus funds deposited at the Resolution and Collection Corporation, a special government entity set up in 1999 to recover the losses, the sources said.
The plan is aimed at finally bringing the housing loan problem, which crippled the financial sector just after the asset-inflated bubble economy imploded in the early 1990s, to a close by the end of the year.
The FSA plans to submit to a bill to the Diet to amend the deposit insurance law so it can make use of the surplus to dispose of losses related to the housing loan firms, the sources said.
The move reflects the government’s judgment that taxpayers won’t approve further use of public funds to resolve the housing-loan mess, the sources said.
The RCC is scheduled to finish its work for recovering the outstanding loans left by the defunct housing lenders by the end of the year.
In fiscal 1996, the government set aside ¥685 billion in taxpayer money for a scheme to buy up the nonperforming loans from the seven housing loan firms, which went belly up after the bubble economy cratered.
The Housing Loan Administration Corporation was created at that time to take charge of the task.
RCC was established in 1999 to take over the nonperforming loans held by Housing Loan Administration Corporation.
RCC tried to recover the loans through sale of real estate properties that had been put up as collateral when money was borrowed from the seven housing lenders.
But as the value of the collateral spiraled during the prolonged economic slump, the RCC was hit by secondary losses that stood at about ¥1.212 trillion as the end of last September.
Based on a Cabinet decision in 1996, the government and private-sector financial institutions are to split responsibility for the secondary losses, meaning each side must shoulder half the sum, or about ¥606.2 billion.
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